Housing Starts Beat Estimates, But Job Creation Missed By A Mile

The January housing report improved partially because the California wildfires didn’t crush starts like they did in December. Most investors knew the weather hurt results. But we weren't sure by how much because the housing market also was weak in December. This was due to cyclical reasons and starts have also been suppressed this entire expansion.

Housing starts rose from 1.037 million to 1.230 million which beat the consensus for 1.170 million. The December report was revised down from 1.078 million, making it look even worse. It’s notable how economic reports can have negative blips. That’s something to keep in mind when we review the huge job growth miss in the February BLS report.

Housing Starts - After falling 28% in December, housing starts in the West increased 29%.

To be clear, we knew how much the West hurt housing starts. But we didn’t know how much of its weakness was caused by the wildfires.

Now we know wildfires caused most of the entire weakness. The housing market wasn’t only weak because of weather though. Housing starts in the South fell 8% in December. The biggest housing region (the South) reversed that decline in January as it grew 14%.

As you can see from the chart below, there was a 25% spike in single-family housing starts. Multi-family housing starts increased 2.4%. Real residential investment growth will surely be boosted by this growth. I will review how this report affected the Nowcasts next.

(Click on image to enlarge)

Permits weren’t impacted by the weather in December, so there wasn’t a huge spike, but the result still beat estimates. Permits rose from 1.326 million to 1.345 million which beat the consensus of 1.287 million. This section of the report was the opposite of starts because single-family permits brought down the result.

Single-family permits have fallen in 3 of the past 4 months as they were down 2.1% in January to 812,000 which is the lowest level in 17 months. Overall permits increased 1.4%. West had a decline of 9% and South fell 3.5%. Midwest and Northeast catalyzed the increase in permits.